Last reviewed 7 August 2018
Why energy resilience and why should management care? Laura King investigates.
A study of 300 businesses by Centrica Business Solutions found that nearly 40% had experienced unscheduled downtime due to an energy-related failure. The costs of this were significant. Almost a third of respondents admitted to losing revenue as a result, with equipment, inventory, reputation and safety all impacted.
The businesses surveyed for the Resilience Report included hospitals, schools, manufacturers, construction companies, hotels and shops — all of which need a reliable supply of energy to stay profitable, or in the case of hospitals and care homes, sustain life. The results painted a stark picture of the lack of readiness for energy interruptions. For example, although 51% of respondents expected to experience an energy failure within 12 months, only 18% had a formal strategy in place to deal with problems in power supply.
These figures mirror those from an earlier Barclays study Powering On which focused on the manufacturing sector. Here, the study reported that of 525 businesses, nearly two-thirds would be vulnerable to an energy shortage or a disruption to supply.
What is the problem?
How we generate energy is changing. Over the last decade, the amount of electricity produced by wind and solar power has increased over 10-fold, and since 2016, wind turbines have produced more electricity for the UK grid than coal-fired power stations.
Despite the many positives of a varied and renewable energy supply, this also causes some unique challenges. Renewables are intermittent by their very nature, meaning that on cold, still days, they do not provide much — if any — power to the grid and other sources have to step up. Balancing supply and demand is becoming harder and more expensive, and is especially difficult if the energy produced by renewables varies wildly from what is expected.
Resilience, however, is not just about the changing landscape of energy production. Interruptions to energy supply can be as a result of a number of other factors. For example, although blackouts are uncommon, they might become more frequent as our climate changes and weather patterns become more unpredictable. Only in June this year, storms in Western Australia left 35,000 homes without power, and in 2016 cost businesses $AU367 million (around £200 million) when they resulted in a state-wide blackout in South Australia.
Human error and internal factors also play a part. According to the survey by Centrica, 67% of businesses admitted that inadequate maintenance was a cause of power supply problems.
What is energy resilience?
Energy resilience is the ability of an organisation to cope with an energy failure or change in energy supply. Although blackouts represent one scenario, brownouts or short-power interruptions can also cause disruption and damage, or trip machinery.
Energy resilience can be achieved in many ways and is part of the solution to the energy trilemma — the price of energy, the reliability of supply and the source of energy.
The energy trilemma is becoming increasingly relevant to UK businesses and industry. Over a quarter of those questioned as part of the Barclays survey were growing more concerned about energy supply, and 36% believed that increasing cost and supply problems would have an impact on their competitiveness. Energy use is no longer an environmental consideration with a commercial justification: it is becoming a business-critical issue.
However, the indication is that many organisations are simply not prepared. The Barclays survey reported that barriers fell into four main categories.
Lack of knowledge about options and best practice.
A skills shortage stopping organisations from implementing robust strategies.
Lack of financial resources and ability to model return on investment.
Leadership and priorities at board level.
Of these, the last is perhaps the most important as buy-in from management can help address other issues around training or commitment of resources and financing.
How to sell energy resilience to management
Step 1: Where is energy being used?
The first step is to understand what energy is being used, where it is being used, and how much visibility there is over operations. Here, it is also essential to capture additional details such as which areas of the organisation (or pieces of equipment) are critical, which parts are susceptible should there be an energy failure, and whether there is any history of problems.
The audit will also provide an opportunity to review energy efficiency measures to see how effective they are and what additional steps are needed. It is also worth speaking with key teams to see how well they work together on energy matters.
Step 2: Find out if you are resilient
Once you have a picture of energy use, the next step is to critically assess the system. As things stand, how energy resilient would you be? What would happen if there were a power failure? Would you have enough backup power to keep critical elements of the business running?
It can be helpful to refer back to historical outages to see what happened and whether anything has changed or improved. As part of this phase, it is also important to speak with operational staff as they will be in an excellent position to understand whether the systems in place are adequate.
Step 3: Understand the cost
If there is an energy failure, how much does this cost the organisation? It is paramount that these figures are understood. Without them, it can be challenging to convey the economic importance of having an energy resilience strategy to justify any expenditure.
Step 4: Understand your options
Some options for energy resilience might be utilising onsite energy generation, shifting energy-intensive activities to a different time or turning off non-critical machinery. Having more flexibility can also mean being able to offer demand-side response services to the National Grid, both improving resilience as well as providing commercial options for the organisation. At this point, talking to energy suppliers or a consultant can be one way of exploring options.
Step 5: Selling to management
The benefits of energy resilience should be quite compelling, but they will be competing for attention in a potentially competitive arena.
Gaining board-level support is much easier if there is already a strategy or targets in place to improve energy efficiency. If this is not the case, then it is essential to understand what drives decision-making in the business. For example, if the driver is purely financial, then focus the business case on reducing the cost of energy supply and any funds generated by selling energy back to the grid. If the security of operations and business risk is a strong focus for management, the main selling point may be around the impact of downtime.
Energy supply and resilience is a business-critical concern that is rising up the corporate agenda.
Many organisations do not have an energy resilience strategy despite admitting that a failure in energy supply could result in losses to revenue.
Energy resilience is the ability of an organisation to ride through a disruption in supply.
To sell the concept of energy resilience, it is useful to collect data about energy use, where critical operations sit, and the impact of a power failure and cost to the organisation.
For more information on all aspects of energy management see our Energy section which includes in-depth coverage of Energy Management, conducting Energy Audits, Energy Procurement and Financial Investment.